Exclusive reporting and analysis for corporate-finance executives.

Workday CFO: Put Employees First

Mark Peek is the chief financial officer of Workday Inc., a provider of enterprise cloud applications for finance and human resource departments. Previously, he was CFO of VMware Inc. and the chief accounting officer of Amazon.com Inc. He spoke with CFO Journal Editor Noelle Knox about putting innovation above profits.

Workday Inc.

Mark Peek

Q: How do you maintain a corporate culture of innovation?

A: The challenge in the finance organization, especially in high-tech companies and high-growth companies, is to bridge the vision – typically of the CEO, who has a product- and broad-market focus that takes you out five to 10 years into the future…[you have to bridge that] with the reality of the business sales organization that has a quarterly number to hit. You have to make sure they don’t err too much on one side or the other.

Q: How do think about profits versus innovation?

A: I am frequently asked the question when will we be profitable? The simple answer is that the greater good is to continue to grow and innovate the business model. That ultimately allows us to become profitable. We would rather err on the side of investing in future products and in winning a larger market than on trying to be the most efficient cost provider. When growth slows you can become more efficient…but of course you need to have enough cash to stay in business. It’s more important to make investment decisions that feed future growth rather than be the lowest-cost provider.

Q: How do you create a culture where you can make bold, calculated risks?

A: You never want to choke off the next great idea. It boils down to process, and not just for the CFO. The CFO provides an enabling framework for how you make investments and how you embrace risk, but the leadership needs to be on board.

Always foster the ability for the company to come up with new and innovative ideas and have a mechanism where they put ideas on the table and weigh them against the market opportunity to decide what has the most realistic outcome of truly changing the market. There are a number of teams that have product development [ideas] that have no tie to our future production roadmap. They are working on the next big thing, with a clean sheet of paper, trying to imagine what a competitor trying to disrupt Workday would do.

Q: What role does the finance department play?

A: Companies driving around earnings per share or operating profits have a real tendency to look at how to grow sales and improve margins. The risk the CFO takes is moving too quickly to improve margins.

The most profitable things you have to have for large market share are either disruptive to incumbents – new and fresh [ideas] – or you have to have built some form of significant market share and just look to extend your lead.

I’ve come into different organizations at different life cycles. And a friend of mine at VMware told me, ”Culture eats strategy for breakfast.” Culture in a company is formed early on, and it’s difficult to take a bad culture and turn it into good, but it can be easy to take good culture and move it into a company that is not as innovative.

We’ve thought about it very carefully and the employees come first. If you do that, customers will have a wonderful experience. Happy employees create happy customers. And ultimately you will have happy shareholders. We try to tell people not to focus on the stock price. If you continue to innovate and improve performance, the share price will ultimately take care of itself.

Comments (3 of 3)

This is exactly why companies like Workday, Google, Linkedin are producing quality. These places attract top talent and foster innovation. Spend a few millions on your employees and gain back 100s of millions back in new ground-breaking products, innovation. These ideas & products are built by the employees not the management sitting on big bonuses.

6:08 pm June 22, 2014

Every U.S. IBM employee wrote:

Mind if we borrow Mark for about 2 years?

11:51 am June 21, 2014

brucewfritch wrote:

Nice reporting by Noelle Knox about a remarkable -- perhaps radical -- CFO, Mark Peek. Good for Mark and Workday Inc.! There is a crisis of "leadership" in the world, that manifests in the contraction of organizational culture to attend to the shareholder while neglecting the other principle stakeholders (e.g., employees, customers, suppliers, society). While it is an absurd and limiting business model, it has the benefit of being authorized, and the increasingly disproportionate compensation of those in authority tends to support the fiction that the sole purpose of a business is to maximize shareholder value (per Milton Friedman and practically every MBA School, since). The truth is that when the culture is geared toward insight, innovation and honor -- with "truly human leadership" -- performance soars. The principal question of such a conscious culture is "how can we do this better?" The question is posed among all stakeholders. The data is clear: conscious organizations consistently outperform Good to Great companies and the S&P 500. I suspect Mark Peek understands this, as do his C-Suite colleagues.

Deloitte's Financial Reporting Alert discusses certain key accounting and financial reporting considerations related to the current economic conditions in the eurozone and Puerto Rico, including a summary of financial reporting implications that would result from a country's decision to exit the eurozone and an outline of disclosures recommended by the SEC in 2012 about European sovereign debt.